Churchill Group Ltd v Vignakumar

Where misconduct is discovered after an unfair dismissal, compensation under section 123(1) of the Employment Rights Act 1996 does not require the tribunal to find that the employee actually committed the alleged misconduct. It must assess whether the employer would have dismissed the employee, when that would have occurred, and whether that hypothetical dismissal would have been fair following an adequate investigation and a reasonable belief in guilt.

The employer bears the burden on those matters. Where the future disciplinary process and its evidence cannot confidently be reconstructed, a tribunal may assess the chance of a fair dismissal and reduce future loss on a percentage basis. A finding expressed as a percentage above 50% does not necessarily require all future compensation to cease where the tribunal remains uncertain whether a dismissal would have been fair.

The claimant had worked for the respondent hotel since 1993. He was dismissed in April 2011 on capability grounds after becoming unable to undertake night shifts. The Employment Tribunal upheld claims for unfair dismissal and disability discrimination.

After the dismissal, the respondent obtained information suggesting that the claimant had operated an outside refrigeration and air-conditioning business while absent on sick leave. At the liability hearing, the Tribunal found a 65% chance that, following investigation, he would have been fairly dismissed for misconduct by 10 August 2011. At the remedies hearing it reduced losses after that date by 65%.

The claimant appealed the 65% finding. The respondent appealed the award of compensation after 10 August 2011, contending that a probability exceeding 50% required future loss to end altogether. The central issue was the proper approach to post-dismissal-discovered misconduct when assessing just and equitable compensation.

1. The claimant’s appeal was dismissed. The Tribunal did not err by declining to determine, as a fact, whether the claimant had actually committed gross misconduct. In assessing compensation under section 123(1) of the Employment Rights Act 1996, it had to reconstruct the hypothetical course of events had the claimant remained employed.

2. That exercise required separate consideration of whether and when a disciplinary process would have led to dismissal, and whether that dismissal would have been fair. The employer bore the burden of establishing both matters. A hypothetical dismissal for misconduct required consideration of reasonable grounds for a genuine belief in guilt after an adequate investigation, consistently with British Home Stores v Burchell and Panama v London Borough of Hackney [2003] IRLR 278.

3. The Tribunal had made an evaluative assessment open to it on the evidence. It had considered the evidence likely to be available, the likely investigation and procedure, and the uncertainty arising from the artificial exercise of reconstructing a future disciplinary hearing. Its reasons adequately explained the 65% assessment and the decision was neither perverse nor insufficiently reasoned.

4. The respondent’s first remedies ground was not open in the absence of a cross-appeal against the liability judgment. In any event, it would have failed. The Tribunal’s language was properly read as finding that dismissal would have occurred by 10 August 2011 but that fairness remained uncertain. In that situation, a percentage reduction to future loss was legitimate. Credit Agricole Corporate and Investment Bank v Wardle [2011] IRLR 604 and Software 2000 Ltd v Andrews and others [2007] ICR 825 did not compel an all-or-nothing result.

5. The remaining grounds of the respondent’s remedies appeal were not determined. The respondent was given 21 days to indicate whether it wished to pursue them.

• Employment Appeal Tribunal: The claimant’s appeal against the liability judgment was dismissed. The respondent could not use its remedies appeal to challenge the liability judgment; its first remedies ground would in any event have been rejected.

• Employment Tribunal, London Central: The Tribunal upheld claims for unfair dismissal and disability discrimination. It found a 65% chance of a fair misconduct dismissal by 10 August 2011 and, at the remedies hearing, reduced post-date losses by 65%.